Becoming a wealthy individual overnight can be overwhelming and challenging for heirs who are not adequately prepared for the transition.
Eric Enslin, CEO of FNB Private Wealth and RMB Private Bank, said a majority of high-net-worth individuals and families were advised well in advance to prepare heirs for their inheritance, but circumstances often do not allow everyone to follow through.
“In some cases, heirs are either too young to grasp the context of the conversation or simply get overwhelmed when reality sets in,” added Enslin.
He shares tips on how to effectively manage a new inheritance:
- Don’t make rash decisions – when inheriting substantial wealth, you often go through an emotional and psychological phase. As a result, avoid putting yourself under pressure to make important decisions immediately. Rather take your time, come to terms with reality and gradually manage the transition.
- Watch spending – spoil yourself within reason, but be careful not to fall into the trap of spending recklessly as this can easily become a bad habit when overlooked.
- Moreover, help out where you can, but don’t be emotionally blackmailed to financially assist family and friends.
- Don’t just quit your job – many people assume that after getting a windfall there is no need to carry on working. However, the decision has to be weighed on its own merit.
For example, if you will be actively managing or overseeing family businesses, it makes sense to quit and narrow down your focus.
On the other hand, if your inheritance does not require you to be hands-on, it may be ideal to carry on working to manage daily living expenses and pay for luxuries and hobbies, such as travelling overseas once or twice a year, instead of tapping into your inheritance all the time.
Consult reputable wealth advisors – a dedicated team of specialists lie at the heart of every wealth management strategy. These are professionals who will go the extra mile to understand your objectives and needs, ensuring that your wealth works for you and your family.
They offer a range of solutions that you will need throughout your wealth journey from preserving wealth, managing tax, investments as well as retirement and estate planning, among other services.
“As a successor, you are now responsible for protecting and maintaining the family legacy while growing and preserving wealth for future generations,” said Enslin. “Therefore, up keeping family values and principles while merging them with your own aspirations is absolutely essential.”
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